8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  November 1, 2007

_______________________

CRYOLIFE, INC.

(Exact name of registrant as specified in its charter)

_________________________

Florida	1-13165	59-2417093
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1655 Roberts Boulevard, N.W., Kennesaw, Georgia  30144

(Address of principal executive office) (zip code)

Registrant's telephone number, including area code: (770) 419-3355

_____________________________________________________________

(Former name or former address, if changed since last report)

_________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02    Results of Operations and Financial Condition.

On November 1, 2007, CryoLife, Inc. (“CryoLife” or the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2007. CryoLife hereby incorporates by reference herein the information set forth in its Press Release dated November 1, 2007, a copy of which is attached hereto as Exhibit 99.1. Except as otherwise provided in the press release, the press release speaks only as of the date of such press release, and it shall not create any implication that the affairs of CryoLife have continued unchanged since such date.

The press release includes supplemental non-GAAP financial measures, including non-GAAP net income, non-GAAP earnings per share and non-GAAP general, administrative, and marketing expenses.  These supplemental measures exclude stock-based compensation expense, changes in the value of a derivative related to the Company’s retired preferred stock, charges related to certain post-employment benefits and gains related to the settlement of an insurance dispute.  The additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net income or earnings per share prepared in accordance with GAAP.  The press release also includes non-GAAP revenues, which have been adjusted from the comparable GAAP revenue numbers to exclude revenues related to orthopedic tissue preservation services.

CryoLife believes that providing adjusted non-GAAP net income and earnings per share provides investors with greater transparency to the information used by CryoLife’s management in its financial and operational decision-making and allows investors to see CryoLife’s results through the eyes of management. CryoLife considers non-GAAP financial measures that exclude the effect of stock-based compensation to be useful metrics for management and investors, allowing CryoLife’s management and investors to compare CryoLife’s recurring core business operating results over multiple periods.  Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FAS 123R, CryoLife’s management believes that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between CryoLife’s recurring core business operating results and those of other companies, as well as providing CryoLife’s management with an important tool for financial and operational decision making and for evaluating CryoLife’s own recurring core business operating results over different periods of time.

In calculating non-GAAP financial measures, CryoLife also excludes certain items to facilitate a review of the comparability of CryoLife’s operating performance on a period-to-period basis because such items are not, in our view, related to the Company’s ongoing operational performance.  In the attached press release, these items included non-recurring items such as the exclusion of changes in the value of a derivative related to the Company’s retired preferred stock, charges related to certain post-employment benefits and gains related to the settlement of an insurance dispute.  Non-GAAP revenues have been adjusted to exclude revenues from orthopedic tissue processing because the Company discontinued procuring and processing such tissue as of January 1, 2007 and is currently only distributing those tissues that were processed prior to that time.  Because the Company’s revenues from these tissues will be reduced to zero in the near future, the Company believes that the non-GAAP revenue numbers presented provide investors with a more accurate measure of the relative revenue performance of the Company’s continuing tissue preservation business.  Accordingly, CryoLife believes that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

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·   the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

·   the ability to better identify trends in the Company’s underlying business and perform related trend analyses; and

·   a better understanding of how management plans and measures the Company’s underlying business.

The information provided pursuant to this Item 2.02 is to be considered “furnished” pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, nor shall it be deemed incorporated by reference into any of CryoLife’s reports or filings with the Securities and Exchange Commission (“SEC”), whether made before or after the date hereof, except as expressly set forth by specific reference in such report or filing.

Except for the historical information contained in this report, the statements made by CryoLife are forward-looking statements that involve risks and uncertainties. All such statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. CryoLife’s future financial performance could differ significantly from the expectations of management and from results expressed or implied in the press release.  Please refer to the last paragraph of the press release for further discussion about forward-looking statements. For further information on risk factors, please refer to “Risk Factors” contained in CryoLife’s Form 10-K for the year ended December 31, 2006, as filed with the SEC, and any subsequent SEC filings. CryoLife disclaims any obligation or duty to update or modify these forward-looking statements.

Section 9 – Financial Statements and Exhibits

Item 9.01(c) Exhibits.

(a) Financial Statements.

Not applicable.

(b) Pro Forma Financial Information.

Not applicable.

(c) Shell Company Transactions.

Not applicable.

(d) Exhibits.

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Exhibit Number	Description
99.1*	Press release dated November 1, 2007
*  This exhibit is furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, CryoLife, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CRYOLIFE, INC.
Date:  November 1, 2007	By:           /s/ D. A. Lee
	Name:      D. Ashley Lee
	Title:        Executive Vice President, Chief
	Operating Officer and Chief
	Financial Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Media Contacts:

D. Ashley Lee	Katie Brazel
Executive Vice President, Chief Financial Officer and	Fleishman Hillard
Chief Operating Officer	Phone: 404-739-0150
Phone: 770-419-3355

CryoLife Reports Third Consecutive Profitable Quarter

Company posts third quarter net income of $1.9 million and $0.07 per share compared to

$2.0 million and $0.07 per share in 2006;

Non-GAAP EPS for third quarter was $0.09 compared to $0.00 per share in 2006

ATLANTA, GA…(November 1, 2007)…CryoLife, Inc. (NYSE: CRY), a biomaterials, medical device and tissue processing company, announced today that revenues for the third quarter of 2007 increased 11 percent to $22.2 million compared to $20.0 million in the third quarter of 2006.  Net income in the third quarter of 2007 was $1.9 million and $0.07 per basic and fully diluted common share, compared to net income of $2.0 million and $0.07 per basic and fully diluted common share in the third quarter of 2006.

Excluding a $601,000 charge related to stock-based compensation, non-GAAP net income in the third quarter of 2007 was $2.5 million and $0.09 per basic and fully diluted common share.  Excluding a net $2.0 million gain related to the settlement of an insurance dispute, and a $185,000 charge related to stock-based compensation, non-GAAP net income in the third quarter of 2006 was $170,000 and $0.00 per basic and fully diluted common share.

Revenues for the first nine months of 2007 increased 16 percent to $69.7 million compared to $60.2 million in the first nine months of 2006.  Net income in the first nine months of 2007 was $4.6 million and $0.17 per basic and $0.16 per fully diluted common share, compared to net income of $415,000 and a net loss of ($0.01) per basic and fully diluted common share in the first nine months of 2006.

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Excluding a $1.5 million charge related to stock-based compensation, an $821,000 charge for the change in the valuation of the derivative related to the Company’s preferred stock, and a $786,000 charge related to post employment benefits, non-GAAP net income in the first nine months of 2007 was $7.7 million and $0.29 per basic and $0.28 per fully diluted common share.  Excluding a net $2.0 million gain related to the settlement of an insurance dispute, an $832,000 charge related to stock-based compensation, and a $448,000 charge related to post employment benefits, non-GAAP net loss in the first nine months of 2006 was ($298,000) and ($0.04) per basic and fully diluted common share.

“Excluding orthopaedic tissue processing revenues of $566,000 in 2007 and $1.7 million in 2006, non-GAAP revenues for the third quarter of 2007 increased 18 percent compared to 2006,” stated Steven G. Anderson, president and CEO of CryoLife, Inc. “The increase in non-GAAP earnings in the third quarter reflects our continued growth in our core cardiac and vascular tissue processing business, as well as our ability to expand gross margins while keeping general and administrative expenses relatively flat on an adjusted basis.”

Tissue processing revenues in the third quarter of 2007 increased 10 percent to $11.3 million compared to $10.3 million in the third quarter of 2006.  Tissue processing revenues in the first nine months of 2007 increased 21 percent to $36.0 million compared to $29.8 million in the first nine months of 2006.  Tissue processing revenues increased primarily due to an increase in demand for the Company’s cardiac and vascular processed tissues and increased availability of these tissues due to improvements in procurement.

Combined cardiac and vascular tissue processing revenues in the third quarter of 2007 increased 25 percent to $10.8 million compared to $8.7 million in the third quarter of 2006.  Combined cardiac and vascular tissue processing revenues in the first nine months of 2007 increased 31 percent to $32.4 million compared to $24.6 million in the first nine months of 2006.  Combined cardiac and vascular tissue processing revenues increased primarily due to an increase in demand for the Company’s processed tissues and increased availability of tissues due to improvements in procurement.

Orthopaedic tissue processing revenues in the third quarter of 2007 decreased 66 percent to $566,000 compared to $1.7 million in the third quarter of 2006.  Orthopaedic tissue processing revenues in the first nine months of 2007 decreased 30 percent to $3.7 million compared to $5.2 million in the first nine months of 2006.  Orthopaedic tissue processing revenues declined during 2007 because the Company discontinued procuring and processing such tissues in the first quarter of 2007.

BioGlue^® revenues were $10.3 million for the third quarter of 2007 compared to $9.4 million in the third quarter of 2006, an increase of 9 percent.  U.S. BioGlue revenues were $7.4 million and $7.1 million in the third quarter of 2007 and 2006, respectively.  International BioGlue revenues were $2.9 million and $2.3 million in the third quarter of 2007 and 2006, respectively.

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BioGlue revenues were $32.4 million for the first nine months of 2007 compared to $29.5 million in the first nine months of 2006, an increase of 10 percent.  U.S. BioGlue revenues were $23.4 million and $22.0 million in the first nine months of 2007 and 2006, respectively.  International BioGlue revenues were $9.0 million and $7.5 million in the first nine months of 2007 and 2006, respectively.

Total product and tissue processing gross margins were 63 percent in the third quarter of 2007 compared to 57 percent in the third quarter of 2006.  Total product and tissue processing gross margins were 61 percent in the first nine months of 2007 compared to 56 percent in the first nine months of 2006.  Tissue processing gross margins in the third quarter of 2007 were 42 percent compared to 33 percent in the third quarter of 2006.  Tissue processing gross margins in the first nine months of 2007 were 41 percent compared to 30 percent in the first nine months of 2006.  The increase in total product and tissue processing gross margins was primarily the result of price increases.

General, administrative, and marketing expenses in the third quarter of 2007 were $11.2 million compared to $8.5 million in the third quarter of 2006.  Excluding a $601,000 charge related to stock-based compensation, non-GAAP general, administrative, and marketing expenses in the third quarter of 2007 were $10.6 million.  Excluding a net $2.0 million gain related to the settlement of an insurance dispute, and a $185,000 charge related to stock-based compensation, non-GAAP general, administrative, and marketing expenses in the third quarter of 2006 were $10.4 million.

General, administrative, and marketing expenses in the first nine months of 2007 were $34.4 million compared to $30.1 million in the first nine months of 2006.  Excluding a $1.5 million charge related to stock-based compensation, and a $786,000 charge related to post employment benefits, non-GAAP general, administrative, and marketing expenses in the first nine months of 2007 were $32.1 million.  Excluding a net $2.0 million gain related to the settlement of an insurance dispute, an $832,000 charge related to stock-based compensation, and a $448,000 charge related to post employment benefits, non-GAAP general, administrative, and marketing expenses in the first nine months of 2006 were $30.8 million.

Research and development expenses were $1.1 million and $826,000 in the third quarters of 2007 and 2006, respectively.  Research and development expenses were $3.1 million and $2.6 million in the first nine months of 2007 and 2006, respectively.

As of September 30, 2007, the Company had  $14.2 million in cash, cash equivalents and marketable securities (at market), of which $1.5 million was received from the U.S. Department of Defense as advance funding for the development of protein hydrogel technology for use on the battlefield.

Financial Guidance

The Company now expects product and tissue processing revenues for the full year of 2007 to be near or slightly below the lower end of its previously announced range of revenue guidance, which is $93.0 million.

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The Company expects general, administrative, and marketing expenses of between $45.5 million and $47.0 million, and research and development expenses of between $4.0 million and $5.0 million for the full year of 2007.

The Company expects product and tissue processing revenues for the full year of 2008 to be between $100.0 million and $104.0 million.

The Company expects BioGlue revenues to be between $47.0 million and $49.0 million, and tissue processing revenues to be between $52.0 million and $54.0 million for the full year of 2008.  Other implantable medical device revenues are expected to be approximately $1.0 million in 2008.

The Company expects general, administrative, and marketing expenses of between $48.0 million and $51.0 million, and research and development expenses of between $6.0 million and $8.0 million for the full year of 2008.  The research and development expectations include an estimate of up to $1.6 million to be funded by the U.S. Department of Defense in connection with the development of BioFoam.

Webcast and Conference Call Information

The Company will hold a teleconference call and live webcast today at 10:00 a.m. Eastern Time to discuss the results followed by a question and answer session hosted by Mr. Anderson.

To listen to the live teleconference, please dial 201-689-8261 a few minutes prior to 10:00 a.m.  A replay of the teleconference will be available November 1 – November 8, 2007 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415.  The account number for the replay is 244, and the conference number is 257727.

The live webcast and replay can be accessed by going to the Investor Relations section of the CryoLife Web site at www.cryolife.com and selecting the heading Webcasts & Presentations.

About CryoLife, Inc.

Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries throughout the United States and Canada.  The Company's BioGlue^® Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels.  BioGlue is also CE marked in the European Community and approved in Canada and Australia for use in soft tissue repair.  The Company also distributes the CryoLife-O'Brien^® stentless porcine heart valve which is CE marked for distribution within the European Community.

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Statements made in this press release that look forward in time or that express management's beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include those regarding anticipated 2007 and 2008 revenues, general and administrative expenses, and research and development expenses.  These future events may not occur as and when expected, if at all, and, together with the Company's business, are subject to various risks and uncertainties.  These risks and uncertainties include that the Company's strategic directives may not generate anticipated revenue and earnings growth, the Company's efforts to continue to increase revenue may not be effective, since their effectiveness is subject to such factors as competitive pressures and tissue availability, that the Company's efforts to develop and introduce new products outside the U.S. may be unsuccessful, that the Company's efforts to improve procurement and tissue processing yields may not continue to prove effective, the possibility that the FDA could impose additional restrictions on the Company's operations, require a recall, or prevent the Company from processing and distributing tissues or manufacturing and distributing other products, that products and services under development, including BioDisc, may not be commercially feasible, that the Company's SynerGraft products may not receive FDA approval when anticipated or at all, that the Company may not have sufficient borrowing or other capital availability to fund its business, that pending or future litigation cannot be settled on terms acceptable to the Company, that the Company may not have sufficient resources to pay punitive damages (which are not covered by insurance) or other liabilities in excess of available insurance, and that the Company may be unable to obtain sufficient financing to fully pursue its strategic plan.  These risks and uncertainties include the risk factors detailed in CryoLife's Securities and Exchange Commission filings, including CryoLife's Form 10-K filing for the year ended December 31, 2006, its most recent Form 10-Q, and the Company's other SEC filings. The Company does not undertake to update its forward-looking statements.

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CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(Unaudited)						(Unaudited)
Revenues:
Preservation services	$	11,347		$	10,319		$	36,019		$	29,839
Products		10,545			9,687			33,096			30,308
Other		268			12			580			74
Total revenues		22,160			20,018			69,695			60,221
Costs and expenses:
Preservation services		6,575			6,954			21,183			20,751
Products		1,615			1,576			5,444			5,581
General, administrative, and marketing		11,240			8,549			34,417			30,106
Research and development		1,098			826			3,134			2,572
Interest expense		178			169			518			504
Interest income		(158	)		(94	)		(360	)		(304	)
Change in valuation of derivative		--			44			821			111
Other (income) expense, net		(350	)		4			(248	)		348
Total costs and expenses		20,198			18,028			64,909			59,669
Earnings before income taxes		1,962			1,990			4,786			552
Income tax expense		55			12			234			137
Net income	$	1,907		$	1,978		$	4,552		$	415
Effect of preferred stock dividends		--			(243	)		(243	)		(730	)
Net income (loss) applicable to common shares	$	1,907		$	1,735		$	4,309		$	(315	)
Income (loss) per common share:
Basic	$	0.07		$	0.07		$	0.17		$	(0.01	)
Diluted	$	0.07		$	0.07		$	0.16		$	(0.01	)
Weighted average common shares outstanding:
Basic		27,501			24,847			25,998			24,804
Diluted		28,056			25,118			26,673			24,804
Revenues from:
Cardiovascular tissue	$	5,566		$	4,189		$	15,587		$	11,550
Vascular tissue		5,215			4,468			16,782			13,066
Orthopaedic tissue		566			1,662			3,650			5,223
Total preservation services		11,347			10,319			36,019			29,839
BioGlue		10,280			9,444			32,373			29,534
Other implantable medical devices		265			243			723			774
Total products		10,545			9,687			33,096			30,308
Other		268			12			580			74
Total revenues	$	22,160		$	20,018		$	69,695		$	60,221
Domestic revenues	$	18,847		$	17,297		$	59,659		$	51,497
International revenues		3,313			2,721			10,036			8,724
Total revenues	$	22,160		$	20,018		$	69,695		$	60,221

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CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands)

	September 30,		December 31,
	2007		2006
	(Unaudited)
Cash and cash equivalents, marketable securities,	$	14,168	$	8,669
at market, and restricted securities
Trade receivables, net		12,931		12,553
Other receivables		1,439		1,403
Deferred preservation costs, net		25,267		19,278
Inventories		5,571		5,153
Total assets		90,892		79,865
Shareholders’ equity		59,256		52,088

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CRYOLIFE, INC. AND SUBSIDIARIES

Unaudited Reconciliation of Non-GAAP Net Income (Loss)

(In thousands, except per share data)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007			2006
Net income – as reported	$	1,907	$	1,978		$	4,552		$	415
Adjustments to net income:
Insurance settlement		--		(1,993	)		--			(1,993	)
Stock-based compensation		601		185			1,524			832
Post employment benefits		--		--			786			448
Change in valuation of derivative		--		--			821			--
Non-GAAP net income (loss)	$	2,508	$	170		$	7,683		$	(298	)
Effect of preferred stock dividends		--		(243	)		(243	)		(730	)
Non-GAAP net income (loss) applicable to
common shares	$	2,508	$	(73	)	$	7,440		$	(1,028	)
Weighted average common shares
outstanding – Basic		27,501		24,847			25,998			24,804
Non-GAAP income (loss) per
common share – Basic	$	0.09	$	(0.00	)	$	0.29		$	(0.04	)
Numerator for non-GAAP diluted income (loss) per
common share:
Non-GAAP net income (loss)	$	2,508		170		$	7,683			(298	)
Less effect of preferred stock dividends		--		(243	)		(243	)		(730	)
Non-GAAP net income (loss) applicable to
common stock	$	2,508		(73	)	$	7,440			(1,028	)
Denominator for non-GAAP diluted income (loss)
per common share:
Basic weighted-average common shares		27,501		24,847			25,998			24,804
Effect of dilutive stock options		555		--			675			--
Weighted average common shares
outstanding - Diluted		28,056		24,847			26,673			24,804
Non-GAAP income (loss) per
common share – Diluted	$	0.09	$	(0.00	)	$	0.28		$	(0.04	)

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CRYOLIFE, INC.

Unaudited Reconciliation of Non-GAAP General, Administrative, and Marketing Expenses

(In thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
General, administrative, and
marketing expense  – as reported	$	11,240		$	8,549		$	34,417		$	30,106
Adjustments to G&A expense:
Insurance settlement		--			1,993			--			1,993
Stock-based compensation		(601	)		(185	)		(1,524	)		(832	)
Post employment benefits		--			--			(786	)		(448	)
Non-GAAP general, administrative, and
marketing expense	$	10,639		$	10,357		$	32,107		$	30,819

For additional information about the company, visit CryoLife’s Web site:

http://www.cryolife.com

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